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NEW YORK (CNN/Money) - I'm in my early 20s and want to start an IRA or Roth IRA soon. I want to take as little risk as possible and I want to keep fees down as much as possible. Any suggestions?

-- Karla Leek, Fort Worth, Texas

First, let me congratulate you for getting such a jump on saving for your retirement. You'd be surprised at how big an edge an early start can give you.

Let's say that you begin putting $100 a month away into an IRA starting at age 20, earn 8 percent a year on your savings and that you maintain this discipline until you're 65.

You'd have a nice tidy sum of just under $500,000 at retirement. Wait until age 30 to do this, and you'd have just over $215,000; hold off till you're 40, and you'd have a bit under $100,000.

I'm not suggesting that these are the actual amounts of money you will end up with. You're not going to get 8 percent year after year on your investments, and as you get older your savings rate will change.

But the point is that the earlier you start, the more money you're likely to end up with.

There's one aspect to your plan that troubles me, however: your statement that you "want to take as little risk as possible." When people say that, what they usually mean is that they don't want to invest in stocks because they're scared of losing money.

That fear is warranted if you think of investing on a short-term basis. So far this year, for example, the Dow Jones Industrial Average is in slightly negative territory. And you only have to go back a few years to find far worse declines, such as the near 50 percent drop in stock prices from 2000 through 2002.

But for someone investing for a retirement that is decades away, the real risk isn't that the value of your money might decline in the short term. The risk is that by investing too conservatively you might not accumulate a nest egg large enough to support you comfortably in retirement.

Stocks can take some frightening dives from time to time, but over the long term, they tend to produce higher returns than other financial assets. Long-term return stats compiled by investment firm Ibbotson and Associates shows that from 1926 through 2004, stocks gained an annualized 10.4 percent a year vs. 5.4 percent a year for bonds and just 3.7 percent a year for short-term Treasury bills.

There's no guarantee stocks will blow the competition away by the same margin in the next 10, 20 or 30 years. But I think it's reasonable to assume that a diversified portfolio of stocks should do better than bonds and certainly better than "safe" investments like CDs and money market funds.

That doesn't mean you should put all your IRA dough in stocks; holding bonds will provide some ballast during market squalls. But someone your age should certainly be putting a good portion of it there. For guidelines on that issue, you might want to check out our Asset Allocation tool.

Now let's get to the issue of costs. The stats that I mentioned above were based on various indexes and thus represent returns before the costs of investing.

In the real world, you've got to incur some investing costs. If you buy individual stocks, brokerage commissions and other transaction costs will reduce the return you get to keep.

If you invest in mutual funds, the annual administrative and portfolio management costs will eat a portion of your returns, as will sales commissions if you buy "load" funds from a broker or other adviser rather than "no load" funds directly from the fund company.

Taxes will also siphon off a portion, although by investing in a Traditional IRA or Roth IRA you reduce the tax man's bite. (For more on how traditional and Roth IRAs work and which might be better for you, click here.)

In general, the more you hold down fees and transaction costs, the higher the returns you will earn over the long term. In the case of stocks, that argues not only for going with brokerage firms with low commission costs, but also keeping trading to a minimum.

And if you're investing in mutual funds, it makes sense to opt for funds with below-average costs and index funds in particular, since index funds typically have the lowest annual charges. (For more on the different types of funds available, the fees they charge and other details on fund investing, click here.)

So go ahead and open that IRA and invest the max ($4,000 for tax years 2005 through 2007, $5,000 in 2008, and adjusted for inflation afterwards) every year if you can. And if you hold the line on fees and follow my advice and don't wimp out when it comes to taking prudent risks, you'll be on your way to building a nice nest egg that can help support you in retirement.

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Retire rich: New strategies

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World."